Lawrence Snapp, Principal Business Strategist, Microsoft
1. What could/should advertising look like in 2020?
In 2020 I believe that a large part of advertising will be divided between traditional brand advertising and more direct marketing. The fastest growing segment will encompass both elements and be a blend of opt-in and measured marketing, culminating in “1-to-Few” marketing relationships, much like Dell’s mass customization of computers (which really are a discreet offering presented in a way that feels custom).
In the next several years marketers will continue to embrace technology to transform the deployment of marketing tactics which drive risk and cost out of marketing investments. This will manifest itself in several specific ways:
First, multi-channel behavioral tracking will continue to improve. There are already many public ways to track and identify the human journey in a digital world. Phones, NFC, WiFi standards, and being in an “always-connected, always logged-in world” will bring a host of opportunities to great CRM/Re-targeting firms (as well as some privacy issues).
Next, companies will embrace big data business intelligence systems (the algorithms or “brains”) & dashboards to drive down the “cost per engagement” and increase conversion by reaching more relevant or qualified consumers faster. This will move UX experts into the limelight if they can translate the data into profits. Hopefully, up front offer engineering also occurred to increase the average margin dollars per basket on offers presented.
Third, agile methodology, something embraced in many development worlds, will be applied more aggressively to marketing. Rigid marketing and long lead time media pre-buys will still exist, but many audiences will only be accessible to well capitalized companies doing pure branding campaigns, and may not be the best use of funds.
Fourth, the same basic marketing principles will apply that have always applied, but seemingly divergent art and science disciplines will converge even tighter. The human psychology of influence, classical marketing and quality creative storytelling will intersect to drive transactions and emotions. This will lead to a bigger role for Hollywood as retail-tainment becomes more important to capture audiences. The gamification of human intercepts will also accelerate in an attempt to deepen the quality of engagements and re-establish a reason for physical retail’s existence.
Also, a flood of companies vertically integrating should be expected. While it may be inefficient at first for brand companies to become retailers, it will spark innovation. This will help keep the channels healthy and accelerate feedback loops.
Finally, variable cost marketing with risk sharing will evolve. Aligned economic interests between agencies and companies will accelerate small and medium firm growth (just as Google has done via their paid search model). Cost per engagement will also move to the forefront of thinking as brands realize the value of an engagement is measureable and can translate into purchases, whereby the hard value of CPM will remain elusive.
2. What should we do now to get ready for that future?
Demand improved marketing investment measurement. Evolve the corporate structure to embrace the different goals (risk reduction and profit growth). Take risks in commercializing innovation. Make sure the organization is thinking about upside as much as downside.
If you are a brand company, consider going direct. Think of your direct effort as the trailer for the movie. There is no better feedback for a product’s ability to perform than a real-world test. I believe that companies who control their own destiny by partially vertically integrating (say 10-20% of revenue) will outperform those who rely solely on channels.
AN EVOLVED MARKETING STRUCTURE
Our world has many products competing for very few meaningful consumer engagement opportunities. Some products are established, but many more products are new. These new products are seeking their market and a minimum scale to be profitable. New products are also becoming more complex and may solve problems in smaller markets. But marketing has always been, and will always be, a classic operational bottleneck for innovation. And unless marketing becomes more efficient and enables more profit faster, innovation will always be held back.
To achieve great marketing, I believe that the marketing function could divide itself into two groups: administrative marketing & innovation marketing. This is because the capabilities, culture, mindset, performance measurement systems, and risk tolerances are drastically different for each function.
First, a more classical administrative marketing role exists in any company with a product that is already established in a market and is unveiling predictable incremental innovation. The primary goal is intelligent growth and ‘predictable’ risk adjusted returns. These marketers tend to worry more about the downside of a program than the upside, which is great for investors. They also tend to think very long term.
Second, an innovation marketer should lead substantial or transformational new products to new markets. They are the ‘innovation commercializers.’ This is a very different role in a company and takes a very different mentality. And depending on how serious the CEO is, each of these groups should have their own leader and report directly to the CEO. Together I believe these marketers are the stewards of today’s share price (administrative marketers) and tomorrow’s share price growth (innovation marketer).
So what… As the risk and cost of product commercialization is reduced it enables and accelerates innovation. Said another way, the more innovation that can be commercialized successfully, the more risk investors can intelligently take at the same or better ROI. And just as Silicon Valley has taught us, the more innovation, the more evolved a region or country becomes.